Old Mutual to list not sell businesses next year in break-up

LONDON – Anglo-South African financial services group Old Mutual aims to list two divisions rather than sell them as it pursues a plan to split into four parts by the end of next year.

Old Mutual, which said last year it is breaking up because regulatory change made its disparate businesses too complex to run, posted a 37 percent rise in first-half operating profit on Friday to 969 million pounds ($1.26 billion), helped by sterling weakness and strong performance in Old Mutual Wealth.

After starting life as an insurance company in Cape Town in 1845, Old Mutual has branched out into other parts of Africa, Britain and the United States, and into banking and funds.

But within a few months of joining as chief executive last year, Bruce Hemphill announced the break-up which will leave him without a job but may entitle him to a maximum bonus of 1,000 percent if he can deliver it successfully.

Hemphill’s plans led to speculation of a sale of Old Mutual Wealth, its fund management arm, but the CEO said there were no offers for the firm’s businesses on the table at present.

“We have had all sorts of interest, our preferred route is to list these businesses,” he told Reuters by telephone.

Old Mutual is not alone in shaking up its businesses, other insurers and asset managers have also been reassessing their make-up due to increased competition.

Prudential said this week it would merge its UK insurance and asset management arms, while Standard Life will merge next week with Aberdeen Asset Management.

Old Mutual will list Old Mutual Wealth in London and Johannesburg, along with Old Mutual Limited (OML), a new holding company covering its emerging markets division, its majority stake in South Africa’s Nedbank and Old Mutual plc.

The listings will involve a demerger for the benefit of existing shareholders, with the possibility of an initial public offering for Old Mutual Wealth. They will take place as soon as possible after the release of full-year results in March.

Analysts say Old Mutual Wealth has a valuation of at least 3.0 billion pounds.

A demerger of Nedbank will follow the listing of OML, although Old Mutual will keep a “strategic minority stake”. It is also reducing its holding in U.S. firm OM Asset Management to 5.5 percent and plans to pay an interim dividend of 3.53 pence, up 32 percent from a year ago.

Analysts said the results were slightly ahead of forecasts, which Barclays called “a credible performance in a tough and uncertain macro environment in South Africa”, reiterating its “equal weight” rating on the stock.

Old Mutual’s shares fell 1.44 percent to 199 pence per share at 0821 GMT, compared with a 1.0 percent fall in the FTSE 100 index.